States Need New Ways to Fund Student Success


To effectively scale successful postsecondary reforms, states must re-imagine how they fund community college.

By David Altstadt

Community college leaders already know much of what needs to be done to improve student success and increase credential attainment. We have good examples of programs that work for students, communities, and employers. The question at hand is how do we scale the types of programs that states and the nation need?

Part of the equation is money—both the adequacy of state funding of institutions and how to distribute incentives appropriately.

It’s Time to Talk Dollars and Sense

JFF commissioned a white paper to delve into the thorny issue of higher education finance and uncover creative solutions to this perennial problem. The paper, entitled Financing Pathways for Students and Community Colleges, is one of four released this fall to stimulate discussion and reform. It looks at ways to improve how states fund postsecondary institutions, measure their impact, and strengthen alignment across education sectors and student support providers. 

Financing Pathways for Students and Community Colleges

A State Policy White Paper

Read White Paper

The emphasis on money, metrics, and systems integration reflects the vision of JFF’s Policy Leadership Trust for Student Success for how policymakers can best catalyze change in higher education. Established in 2015, the Trust comprises two dozen prominent postsecondary leaders who provide the practitioner’s perspective on how state and federal policy can help institutions implement and scale evidence-based, student success reforms. 

In 2016, community colleges served about 30 percent of all postsecondary students in the United States but generated only about 10 percent of all institutional revenue.

How Do We Pay to Scale What Works?

Financing Pathways for Students and Community Colleges calls attention to a City University of New York initiative called Accelerated Study in Associate Programs (ASAP). Over three years, this program has doubled the odds of students’ college completion. The initiative’s success comes from providing a robust and integrated suite of academic and student support services. 

It’s important to realize that only about 11 percent of the program’s costs are related to course instruction; far greater resources are dedicated to program planning, advising, student financial aid, and other support services. Yet, for most community colleges across the nation, the only function on campus that generates sustainable revenue is credit-bearing courses (see Figure 1 below). 

Typically, colleges’ most common sources of funds—tuition, state appropriations, and occasionally local appropriations—are all tied to the credit hour. The other academically important functions are considered overhead from a business point of view. Admission, orientation, advising, transfer, curriculum design, career placement, financial aid, and health and safety are critical components of a successful college experience that lack dedicated funding sources. 

psn 2

Further complicating things: if key components like advising and curriculum planning were executed perfectly, through reform efforts like guided pathways, they might actually reduce revenue generated by courses. Thanks to pathways, students would likely not accumulate as many excess credits because they would choose a program of study earlier, take the appropriate courses, and be less likely to change their major. 

Figure 1: Funded and unfunded components of college services and supports to students

Higher Education Funding Models Must Change

In order to scale effective student success strategies, such as ASAP and guided pathways, we need to reimagine our model for funding higher education. A strong argument could be made that overall spending on higher education by taxpayers and consumers is already quite substantial.

Financing Pathways for Students and Community Colleges calls instead for re-evaluating the distribution across two-year and four-year institutions, as well as the mechanisms for allocating funds. Consider that, in 2016, community colleges served about 30 percent of all postsecondary students in the United States but generated only about 10 percent of all institutional revenue. 

All told, the white paper makes recommendations for improving the alignment, timing, and quantity of funding. Here are five provocative yet actionable policy ideas that states ought to consider:

  1. Change public funding to a different kind of outcomes-based mechanism.
  2. Create dedicated revenue streams for all essential services. 
  3. Provide seed money to cover startup costs of transformative reforms. 
  4. Create a rainy-day fund to weather the next economic recession, when demand for college services goes up while the funds in state coffers go down.
  5. Offer incentives for more people to donate money to community colleges. 

The paper explores each of these recommendations at length and offers real-life examples. Readers are encouraged to take a look and share their reactions on social media with the hashtag #JFFPostsecondary